Amendments to IFRS 16 Leases were issued in May 2020 adding a practical expedient which allows a lessee to elect not to assess whether a COVID‑19‑related rent concession is a lease modification. No practical expedient is available to lessors.

A lessee that makes this election accounts for any change in lease payments resulting from the COVID‑19‑related rent concession in the same way that it would account for the change if it were not a lease modification in accordance with IFRS 16.

The practical expedient applies only to rent concessions occurring as a direct consequence of COVID‑19 and only if all of the following conditions are met:

• the change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change;
• any reduction in lease payments affects only payments originally due on or before 30 June 2021 (a rent concession would meet this condition if it results in reduced lease payments on or before 30 June 2021 and increased lease payments that extend beyond 30 June 2021); and
• there are no substantive changes to other terms and conditions of the lease.

If a lessee chooses to apply the practical expedient, it would apply the practical expedient consistently to all lease contracts with similar characteristics and in similar circumstances.

Effective date and transition

A lessee shall apply the amendments for annual reporting periods beginning on or after 1 June 2020. Earlier application is permitted, including in financial statements not yet authorised for issue at 28 May 2020.

Despite the wording “annual reporting periods”, the amendment is also available for interim financial reports.

A lessee shall apply the amendments retrospectively.

We informed you of these amendments in detail in the article IASB Amended IFRS 16 Due to the COVID-19 Pandemic.

Sources: www.iasplus.com, Amendments to IFRS 16